DUBAI, 10 June 2008 — Despite the decree issued by Sheikh Mohammed ibn Rashid Al-Maktoum, vice president, prime minister of the UAE and ruler of Dubai, exempting cement and reinforced steel from custom duties until further notice, the price of structural steel has recently risen by between 15 and 25 percent. In response, developers are raising their voices louder than ever to call for other measures to protect them from brokers, hoarding and black market speculation, and to allow them to import cement and reinforced steel without restriction so that they can overcome the soaring prices.
According to various real estate reports, the hike in the price of reinforced steel is not limited to Dubai or the UAE. It is rather a trend that can be seen throughout the GCC countries and which is driven by the real estate boom and the recycling of surplus petrodollars, much of which is taking place in the real estate sector, the safest and fastest growing investment channel in the regional markets.
Fakhruddin, from Fakhruddin Properties, said of the situation, “The GCC countries have started addressing this issue, with more than $18 billion being invested in 46 steel manufacturing plants throughout the Gulf in an attempt to close the widening gap between supply and demand for steel, a major component for the construction industry. These projects indicate aggressive growth in the industrial sector, in line with the five-year real estate boom.”
“The current flow of real estate projects, coupled with the expectations that this trend will continue in the region over the coming two decades, led us to seriously consider possible investment in steel projects, bearing in mind that we would need to bridge the current gap between supply and demand, while avoiding a situation of oversupply of these materials in the future once a balance has been established in the real estate market,” Fakhruddin added.
According to recent industry research, in the face of rapid growth in domestic demand, the UAE and other Gulf countries are planning to develop 46 steel manufacturing plants throughout the GCC countries in order to expand output. Leading the way in these steel plant projects are Saudi Arabia, with 17 plants, and the UAE, with 16. Six of the remaining 13 plants are to be located in Oman, four in Bahrain and three in Qatar. The estimated cost required to establish a steel factory with full production capacity varies between $15 million and $2 billion, while the estimated cost to establish ten manufacturing plants, studies for one of which are currently underway, is $10 billion.
